IPTV is a business that utilizes broadband networks to provide users with interactive multimedia services, with its main characteristics being interactivity and real-time. Through IPTV services, users can receive high-quality digital media services and freely choose video programs on broadband IP networks, achieving substantial interaction between media providers and media consumers.
IPTV can provide services mainly including television services, communications services and various value-added service. Specifically, television services refer to services related to television business, such as broadcast television, on-demand television, personal video recording, etc; Communication services mainly refer to voice services based on IP, instant messaging services, television short messages, etc; Value-added service refers to TV shopping, interactive advertising, online games, etc.
IPTV integrates the relevant characteristics of traditional television and the Internet, so it can be seen as a combination of traditional television services and emerging telecommunications services. The IPTV service not only expands the use of terminals for telecommunications services, but also expands the range of services that television terminals can support. For traditional television operators, the emergence and development of IPTV is a huge challenge, while for telecommunications operators, deploying IPTV services to provide users with new applications and rich services will be an effective way to enhance competitiveness and profitability.
The main driving force for telecom operators to develop IPTV
The development of IPTV by telecom operators can not only promote the development of broadband access, but also increase revenue while reducing user disconnection rates. At the same time, it can also address the challenges from cable TV operators.
The development of broadband access requires strong support from businesses, and the existing narrowband services are far from meeting the needs of the broadband era. Exploring new ways of user growth and business volume growth has become an important issue that fixed network operators need to pay attention to when developing broadband access. Telecom operators urgently need to find new services that can attract users and consume bandwidth, and IPTV is the business that suits this demand.
The development of IPTV business can bring potential lucrative profits to operators. Due to the relative saturation of traditional voice services and the lack of sufficient attractiveness of simple data services, telecom operators urgently need to find new profit growth points. For operators, despite the rapid development of data services and the fact that the network traffic of data services has begun to exceed traditional voice, the ARPU crisis faced by telecom operators cannot be solved due to the low unit price of services and slow revenue growth. Telecom operators provide bundled services including video, which can increase per user revenue while cultivating user loyalty, which is beneficial for maintaining users and reducing offline rates. Research has shown that providing three types of business bundling can reduce the offline rate by 50% compared to only providing a single business, and by 25% compared to providing two business bundling.
In some countries and regions with high levels of market openness, governments have relaxed regulations on the entry of cable television into telecommunications operations, allowing them to penetrate each other, providing opportunities for cable television operators to enter the telecommunications industry. In this competitive situation, telecommunications companies are not willing to fall behind. In order to seize the opportunity in future competition, European and American telecommunications operating companies have begun to deploy video services mainly based on IPTV. Deploying triple play services bundled with IPTV services can enable telecom operators to establish a favorable competitive position against cable TV operators, cultivate market and user demand through IPTV and other video services, and increase their experience in video business operations.
Analysis of IPTV Service Market for Foreign Telecom Operators
Since Video Networks launched its IPTV service in 1999, many foreign telecom operators have entered the IPTV market one after another. From the perspective of global development, although telecom operators believe that IPTV is suitable for future development needs and have begun to deploy this business, due to the lack of sufficient operational experience in IPTV by telecom operators, the operating market is not yet mature, and the user market still needs to be cultivated. This business form is also subject to competition from traditional cable TV and satellite live TV, Therefore, overall, the development of IPTV is still in its infancy.
The operators deploying IPTV services are concentrated in Europe, America, and some countries and regions in the Asia Pacific region. Telecom operators typically use high-speed DSL or FTTP technology to provide IPTV services to users. By the end of 2004, the two largest operators with the highest number of IPTV users were FastWeb in Italy and PCCW in Hong Kong, China. These two companies had nearly 70% of the user market share in terms of television users.
In the IPTV market of North American telecommunications operators, traditional Canadian telecommunications companies are at the forefront. Manitoba Telecom (MTS) and SaskTel have already opened IPTV services in VDSL and ADSL networks, and Telus and Bell Canada also plan to enter this market in 2005. From the perspective of user development, as of September 2004, the number of IPTV users of Canadian telecommunications operators was about 50000, accounting for about 2% of the total number of television users. It is expected to reach 250000 users by the end of 2006, and their market share will steadily increase, accounting for 17%.
Compared with the Canadian IPTV market, the development process of the US IPTV market is relatively stable. Large American telecommunications companies SBC and Quest initially chose to collaborate with satellite television companies to provide IPTV services in the form of reselling satellite broadcast television services. Numerous independent local operators in the United States are also actively conducting IPTV services on DSL and fiber optic networks in their territories.
Many telecom operators in Europe also have a positive attitude towards IPTV business, especially FastWeb's success in IPTV business in Italy, which has changed the wait-and-see attitude of many operators. France Telecom has the most positive attitude and has already opened its business in Lyon, with plans to open its business in Paris in March 2005. Belgium Telecom, Netherlands Telecom, Austria Telecom, and Norway Telecom are all conducting commercial experiments on IPTV.
When foreign telecom operators enter the IPTV market, their preferred services are often live TV and on-demand TV. Some operators also provide a variety of value-added service. For example, Canada's MTS provides interactive program navigation and call display that can be searched by topic or title, and has opened a TV portal, through which users can get public information such as weather and channel information; TCC, a subsidiary of SK in South Korea, provides applications such as time-shifted television and television commerce.
Foreign operators often adopt a bundled service model when conducting IPTV business, which provides users with a triple service - triple play. This is a service model that integrates voice, high-speed internet access, and IPTV. This emerging service model reflects the close connection between operators and users, and operators can provide users with three types of services simultaneously; Users can use services through the same terminal or different terminals in the home network. Triple play is born in a new market environment, which can not only meet the needs of users for dialogue audio services, but also meet their needs for high-end business. More importantly, users can enjoy the tariff discounts brought by business bundling. The bundled services of MTS TV and DSL provided by MTS in Canada have a 12.5% reduction in fees compared to the sum of the two business fees. The Triple play model has greatly promoted the development of IPTV, while also bringing sustained growth in ARPU to operators. For example, about 60% of residential users of SureWest, a small independent telecommunications company in California, have ordered triple play, and the company's average monthly ARPU in 2003 reached around $103, with a user churn rate of only 2%.
Challenges for Operators Deploying IPTV
IPTV has begun to take off globally, and its development has been driven by both technological progress and market demand. Firstly, one of the key technologies of IPTV - the advancement of video compression technology, enables video programs to achieve higher picture quality with lower bitstreams; Secondly, the development of broadband networks by operators has provided a reliable and stable pathway for the transmission of IPTV services; Thirdly, telecom operators have vigorously deployed broadband access, but have not received sufficient profits from it, and the profitability of broadband is still limited to the collection of access fees; Finally, the prosperity of broadband access has not brought prosperity in content services. Most of the business and applications on broadband networks are still in the narrowband era, and the consumption needs of broadband users are far from being met. The above points indicate that the internal technical factors and external demand factors for the development of the IPTV market have basically matured.
However, for operators, deploying IPTV services involves many issues, such as the funding required for upgrading and renovating existing networks, the selection of operational and profit models when launching new businesses, and the competition faced by existing service providers when entering new fields. Overall, the determination of business models, the presence of market competition, and the lack of video content are the main challenges faced by telecom operators when deploying personal video services mainly focused on digital television.
(1) It is unclear whether triple play, which integrates IPTV, high-speed data, and voice services, can reverse the trend of declining revenue for telecom operators. Although some companies have achieved success in using triple play in IPTV operations, the suitability of the triple play business model remains to be verified due to the complex industrial environment in which IPTV operates.
(2) Telecom operators are facing a complex market environment. Compared to cable and satellite television companies, as new entrants, telecom operators have limited market space and limited business price space in the initial stage. In Manitoba, Canada, Shaw Company launched the cable plus TV business as early as 1999, with a bundled service price of CAD 89.95 per month, which is CAD 20 higher than the bundled price of MTS's DSL plus TV launched four years later.
(3) The lack of content is also one of the challenges faced by telecom operators, especially in countries with low market openness, which is particularly prominent. Due to the lack of control over program sources by telecom operators, obtaining content that can attract users is also one of the key issues that operators need to solve when deploying IPTV.
(4) Due to the fact that foreign operators who have entered the television market only conduct business locally and on a small scale, with a small number of users, there are no examples of providing IPTV applications to large-scale users on the telecommunications broadband network. This is also a problem that operators should carefully consider. The bandwidth requirements of IPTV services far exceed those of existing voice and data services, and there are strict requirements for other indicators such as channel switching delay and QoS. How to ensure that users can watch programs of comparable quality to the current cable television network is an important issue that operators need to solve.
Telecom operators face many risks and challenges when entering the IPTV market. How to respond to and mitigate risks is an important guarantee for operators to achieve success in the IPTV field. Drawing on the operational experience of foreign operators, the following countermeasures can be summarized: first, conduct research on the market environment, including national regulatory policies, market size, user needs, user cultural habits, potential profits, etc., and comprehensively analyze these research information. At the same time, analyze competitors to develop a timetable and operational model for deploying IPTV; Secondly, unify the planning of business and network, which includes two aspects: business definition and pricing. The rationality of business planning directly affects the number of users and overall income. Network planning should be combined with business planning and carried out uniformly. Due to the high bandwidth requirements of video services, operators should first consider upgrading the network to support the implementation of multiple business combinations after planning their business; Finally, operators should seek cooperation with content providers and establish a reasonable cooperation model.
The Future Development of IPTV
IPTV business closely connects communication oriented and content oriented businesses, and the combination of these two types of businesses requires deep cooperation between two independent markets - the telecommunications market and the media market. Only with rich content and strong network support can IPTV business achieve rapid development. Since 2004, dozens of telecom operators worldwide have entered the IPTV market, and by the end of 2004, the global number of IPTV users had exceeded 1 million. In the next two to three years, IPTV business will enter a stage of scale development, and the number of users will continue to grow. According to In Stat/MDR company predictions, by 2008, telecom operators' IPTV services will cover over 75 million households worldwide, with actual global users reaching 14 million.
In the early stages of IPTV development, the IPTV business provided by operators mainly focused on live television, on-demand television and other television services. With the growth of the IPTV market, the applications provided by operators will become more diverse. Users can access value-added services such as TV shopping and games, as well as communication services such as voice, instant messaging, and TV SMS through TV.